The CMI and the Institute of Directors’ joint research report shows how management and leadership will bolster the UK’s economic recovery with almost all managers and directors say that enhancing management and leadership skills are critical to improving performance in the coming financial year.
1. The UK is lagging behind rivals when it comes to leadership
Good management and leadership are crucial to building back better – to deliver thriving and innovative companies, and good quality jobs. Yet the UK faces a management and leadership skills crisis: globally, the UK has been ranked well behind key competitors such as the US, Japan and Germany in terms of its leadership capabilities and this management and leadership crisis shows no signs of abating.
The UK has for many years lagged behind other G7 nations; at a firm level, the UK has a so-called ‘long-tail’ of low-productivity SMEs relative to other developed nations. This is partly due to a lack of government investment in higher level skills and the lack of a supportive policy framework to enable private investment. Yet there is a way to turn this productivity deficit around: good management and leadership skills are a key enabler of firm-level productivity by unlocking important drivers of growth such as capital investment, technology adoption, on-the-job learning, and efficiency improvements.
2. Delivering a sustainable plan for growth isn’t possible without closing the productivity gap
The Bank of England believes that a lack of management quality is an explanation for the UK’s poor productivity; research from the Confederation of British Industry (CBI) indicates that businesses that improve their management practices from the lowest levels to the UK median can increase their productivity by 19%. The government recognised this in its 2019 Productivity Review noting: ‘Businesses that embrace leadership and management best practice and adopt tried-and-tested technologies are more profitable, productive and are better to work for. We need to get businesses across the country to adopt these actions and boost their own productivity’.
“Directors and the senior leadership of organisations have told us they need workers with the management skills necessary to drive companies forward,” says Jonathan Geldart, director general of the IoD. “The leaders of the engine of the economy have spoken and we encourage the Chancellor to listen to their voice.”
3. Good managers and leaders are essential to reskill the nation
With the Office for Budget Responsibility estimating that there could be 2.6 million people unemployed by the middle of 2021, the government is about to embark on a substantial programme of job creation. The government’s “Plan for Jobs” aims to create tens of thousands of new roles in infrastructure, decarbonisation and maintenance projects, among other areas.
Highly skilled, capable and empathetic managers will be essential to absorb, train, guide and develop recruits for these new roles, particularly in new professions where ways of working are only just being established. These managers will be needed in large numbers, so consistent high standards of training for them is essential. For instance, the government plans to create two million green jobs alone by 2030; this could require a minimum of 130,000 new leaders and managers.
4. We need leaders to help build organisations’ resilience
Covid-19 has demonstrated that business leaders in the UK cannot be complacent. Before the pandemic we had already seen technological innovation but the past year has ushered in an unprecedented era of change and unpredictability. Business resilience has been hit hard: in January 2021 32% of businesses had three months’ or less cash reserves, while only 73% of businesses remained trading.
Managers and leaders can help ensure organisations are resilient, by being quick to innovate, and to assess and mitigate risks. This CMI and IoD joint research demonstrates that 74% of managers and 63% of directors identify either managing uncertainty, managing risk or leading change and innovation as important management competencies for driving organisational performance in 2021.
5. The government must incentivise lifelong management learning
Co-investment between employers and government is an important principle as far as management training and education goes. But we know that in times of economic uncertainty businesses will underinvest in these skills. Yet now is the best time to act; when government can have the biggest impact. To address this market failure we are calling on the government to:
- Allocate additional funding to ensure that every course funded through the National Skills Fund also includes a ‘bolt on’ of high-quality core skills training, including digital, communication and management and leadership provision
- Extend support for adult skills through the Lifetime Skills Guarantee up to Level 5, enabling adults who already have a Level 3 qualification to access critical training at higher levels
- Introduce targeted support for all SMEs to boost their management and leadership capabilities with all SME business leaders given the opportunity to undertake a high quality management or leadership qualification.
You can read the CMI’s full report here.